A broad injunction
Arbitration has many advantages over litigation – enforcement of arbitral awards in a New York Convention state 1, neutrality, finality, and flexibility.
Another advantage is confidentiality. In Hong Kong, this is enshrined in the Arbitration Ordinance (the Ordinance); subject to limited exceptions 2, the arbitral proceedings under the arbitration agreement and an award made in those arbitral proceedings are confidential 3.
In August 2022, the plaintiff was granted an ex parte injunction according to which the defendant was restrained from disclosing, publishing or communicating any information related to arbitrations that had commenced in Hong Kong between the parties or of any award ultimately to be rendered in the arbitrations.
The terms of the injunction were broad, covering the very existence of the arbitrations, the identity of the parties, the nature of the claims, defences and counterclaims, the quantum claimed or counterclaimed, the factual allegations and the outcome of the arbitrations including the existence of any award and the identity of the successful party.
Subsequently, the plaintiff sought an ex parte injunction to restrain the defendant from disclosing information relating to the arbitrations and their connection with the product, including the product's "issuance, promotion or redemption" and from taking any further steps to issue or promote the product (the restraining order).
The court however was not prepared to make such a wide order at the ex parte stage on the basis of delay and the perceived need to hear the defendant's case.
The plaintiff then issued a series of applications, first on an ex parte basis (which was dismissed with costs), then on an inter partes basis (i.e. a hearing between both parties) and asking that the application be heard urgently. The court directed that the issue should be confined to the preliminary question of why the court should not decline to grant the restraining order sought under section 45(4) of the Ordinance.
The plaintiff argued that the defendant had made application to the court in the Seychelles (where the defendant was incorporated) for a scheme of restructuring and/or arrangement, which "involved or contemplated the issue of the Product", such that the application for the restraining order directly referring to the product should not be delayed.
Grounds to decline interim relief not exclusive
The plaintiff's application for interim relief fell within section 45 of the Ordinance. Under section 45(2), the court "may" in relation to any arbitral proceedings which have been or are to be commenced outside Hong Kong, grant an interim measure.
Section 45(4) states that a court may decline to grant an interim measure on the grounds that (a) the interim measure sought is currently the subject of arbitral proceedings; and (b) the court considers it more appropriate for the interim measure sought to be dealt with by the tribunal. The plaintiff argued that both of these conditions had to be satisfied before the court could decline the grant of the interim measure.
The court concurred with the defendant however that the section "does not set out the only and exclusive grounds for the Court to decline the grant of an interim measure", noting that the powers under the section are discretionary and an interim measure sought by any party may, or may not, be granted by the court. It did not follow that the court had to grant the interim measure if the section did not apply, noting that the section "cannot be exhaustive of the grounds on which an application for interim measure may be declined."
The court had in every case "to decide whether it is proper, just or convenient for the Court to grant the injunctive relief sought, taking into consideration matters whether there was delay in the application and hence the need for the relief, and whether the balance of convenience lies in favour of the grant of the injunction."
The court also referred to section 45(7), in the context of the court exercising its powers to grant interim measures in relation to arbitral proceedings outside Hong Kong, when the court is required to have regard to the fact that its power is ancillary to those proceedings. The relief now sought by the plaintiff related to arbitrations commenced in Hong Kong, but there were "constant reminders given by the Court that it acts only to support and aid the tribunal, and to facilitate the speedy resolution of disputes by arbitration in accordance with the parties' agreement."
The principle of "minimal curial intervention" was "based and underpinned by the need to recognise the autonomy of the arbitral process, and the fact that parties who opt for arbitration must be taken to have acknowledged and accepted the attendant risk of having only a limited right of recourse to the courts."
Interim relief inappropriate
Mimmie Chan J said that the terms of the injunction were clear and if the plaintiff contended that the defendant had acted or threatened to act in breach of it, it was open to the plaintiff to take appropriate action against the defendant and others by way of enforcement including the institution of contempt proceedings.
If the plaintiff felt that the proposed scheme of arrangement and/or the issue or promotion of the product would involve a potential breach of the injunction, the plaintiff was "free and entitled to inform the Seychelles court" of the concern. Whether the promotion and issue of the product was a breach of the injunction could all be argued before the court in the Seychelles. It was neither urgent nor necessary for the court "to explain or clarify on the plaintiff's application the terms of the injunction already made" before the plaintiff could raise an objection in the Seychelles to the approval of the scheme.
The court also noted that the tribunal had been constituted and was now in place. Mimmie Chan J failed to see why the tribunal should not deal with the application. There was "no evidence adduced and no submissions made, to the effect that the Tribunal has no power to deal with and determine the application for the Restraining Order." The plaintiff had insisted, "for no good reason discernible" that the court should hear its application instead of the tribunal, which "clearly has the power, inherent in and incidental to the parties' agreement to submit their dispute to the Tribunal for arbitration" and to grant the restraining order, if it saw fit to do so.
Disputes around the confidentiality of the proceedings were "inevitably caught by and fall within the terms of their arbitration agreement, and the parties are bound to refer such disputes to arbitration as well." The court found force in the submissions made by counsel for the defendant that the application could be said to be necessarily part of the subject matter of the arbitrations.
A mystery product but clear direction
Applications for interim measures are usually made to the tribunal, unless it has not been constituted, where the parties have the choice to go to an emergency arbitrator or the courts. Under section 37 of the Ordinance (which adopts the Article 17B UNCITRAL Model Law provisions), a party may apply for an interim measure together with an application for a preliminary order directing a party not to frustrate the purpose of the interim measure requested. These are effectively orders granted without notice to the other party.
Several provisions in the Ordinance also recognize that the tribunal is often the more appropriate body to deal with applications for interim assistance. In addition to section 45(4) (referenced above), section 60(4) provides that the court may decline to make an order where the matter is the subject to arbitral proceedings, and it is 'more appropriate' for the matter to be dealt with by the tribunal.
In previous cases, the Hong Kong courts have also refused to grant relief unless there were reasons why the court (other than the tribunal) should grant the order.
The court's decision is another reminder of the "pro arbitration" stance of the Hong Kong courts that will intervene only in the rarest of cases where a tribunal is administering an arbitration in accordance with the parties' agreement, and as provided in the Ordinance. Of interest here, was the suggestion that a decision of a Hong Kong tribunal should be brought directly to the attention of the Seychelles court without ever needing to pass through the Hong Kong courts.
To do otherwise would entail, in the words of the court, "an unnecessary duplication of costs and judicial resources (a matter of public policy) for the same issues to be submitted to the Hong Kong Court and the Seychelles Court, in addition to the Tribunal, for consideration and determination".
- At the time of writing, 171 countries are parties to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958
- Section 18(2) Arbitration Ordinance, Cap. 609
- See Section 18(1) Arbitration Ordinance, Cap. 609
Authored by James Kwan, and Nigel Sharman.